China’s Global Campaign to Nab Fugitives: Q&A with Ronald Cheng

In this Sunday, June 21, 2015 photo released by China’s Xinhua News Agency, six fugitives involved in economic crimes are taken back under escort from Indonesia, at Capital International Airport in Beijing.

Associated Press

As the year comes to a close, Chinese state media are trumpeting the latest results of its ongoing global effort to bring corruption suspects to justice: 700 economic fugitives returned from abroad since April, including 48 who were in the U.S. Left unmentioned in the reports, however, are tensions between Washington and Beijing over how China is conducting its two campaigns to bring those people back, dubbed “Fox Hunt” and “Sky Net.”

As a U.S. federal prosecutor, Ronald Cheng helped put away Xu Chaofan and Xu Guojun, two Bank of China managers who stole more than $480 million before fleeing to the U.S. in the early 2000s. He is now a partner with the law firm O’Melveny and Myers, focusing on corruption, data privacy and intellectual property. In an interview, Mr. Cheng discussed China’s campaign to retrieve fugitives, legal barriers between the U.S. and China and what the law says about another hot-button question, Chinese hacking. Edited excerpts below:

WSJ: China recently said there was “room for improvement” after other countries complained about the covert agents it was sending to hunt down corruption suspects abroad, including in the U.S. How unusual is it for China to send agents to the U.S. like that?

Mr. Cheng: As far as I know, this kind of activity is relatively new. I would say there is concern on the U.S. government side about it – specifically making sure that there is cooperation between our government agencies and China’s from the outset.

Former U.S. federal prosecutor Ronald Cheng.

Ronald Cheng

WSJ: What can those agents do to compel Chinese citizens to go back with them?

Mr. Cheng: If a person is not acting under any sort of constraint of law, I suppose there are any number of things that are possible. But if you’re talking about a foreign government trying to get criminal action against an individual, there are very limited channels. And if it’s a matter of actually compelling an individual to get on an airplane, that comes very close to kidnapping.

WSJ: At the same time, people on the U.S. side complain that Beijing isn’t giving them enough information about the fugitives it wants help with.

Mr. Cheng: Right. Quite honestly, my view on this is a little bit different. It’s more historical. I don’t think problem started with Fox Hunt or Skynet. Those are fairly recent campaigns. The Chinese have raised the issue of corruption in the past and there’s always been a large number of people that they’re interested in. I think the problem has always been what they give you: it’s sometimes a name, it’s sometimes the name of an offense, or sometimes an Interpol Red Notice, but not much more than that. In order to conduct an investigation in the United States, there have to be some leads as to evidence, whether it’s money flows or associates.

WSJ: Does the Chinese side just not understand what’s needed, or is there something else to it?

Mr. Cheng: I tend to think it’s a lack of understanding of how things work in the United States. In the U.S., for an investigation, at some point you’re going to run into the need for judicial process, whether it’s a search warrant or a request for electronic information, and that’s got to be backed up with a showing of facts. There’s more understanding now, especially in places like Beijing, but often times you’re dealing with police in a different province that don’t fully understand that.

There’s also the underlying issue of extraterritoriality. If a crime has been committed in China, the reason why the U.S. would have an interest is if there is activity that directly affects a U.S. interest. If it’s just a matter of a fugitive being in the United States but not committing a crime there, it’s a much more difficult case than if, say, he had been involved in money laundering or immigration fraud in the U.S.

WSJ: What’s the U.S. incentive to cooperate with China on finding and returning their fugitives?

Mr. Cheng: Generally, the U.S. does not have an interest in acquiring the reputation of being a safe haven for corrupt officials, from any country really. So that’s one thing. The other thing, and this is my own personal take: As these corrupt officials settle down in the U.S., particularly if they settle in Chinese communities, there’s a very strong temptation to resume business as usual. It’s not good for the local government, because then that place gets infected by the same sorts of practices the Chinese government is trying to do something about, whether it’s corrupt dealings in a small real estate project or something on a larger scale. So local governments have an incentive to try to remove those individuals.

WSJ: Looking at this from the cybersecurity angle, China appears to be more willing to work with the U.S. on arresting Chinese hackers suspected of attacking U.S. targets. How likely is it those hackers will ever face trial in the U.S.?

Mr. Cheng: Because there is no extradition treaty between the United States and China, it is difficult to envision a Chinese national being sent by China to the United States for prosecution. On the other hand, if a suspect should enter the United States or a third country with an extradition agreement with the United States, and the suspect is arrested there, that suspect could face charges in the United States.

WSJ: What are the current options for US companies who’ve had trade secrets stolen by Chinese hackers? What can they do to recover what they’ve lost?

Mr. Cheng: A victim company in this situation would need to conduct its own investigation to determine the extent of its loss and how the invasion happened. After that, they could engage U.S. law enforcement for criminal investigation and prosecution. A victim has to determine whether its secrets are being unlawfully exploited–either domestically or overseas. If so, they could take civil measures against the attacker. Based on our experience in working with companies that handle substantial amounts of customer and proprietary information — and that is virtually every company — a company with trade secrets needs to consider crisis planning now, before there is any sort of attack, to ensure that it has done the most it can to harden its system and be ready to respond if a hacker compromises the company’s systems.

WSJ: Chinese state media said Beijing officials raised specific U.S. cyber attacks on Chinese targets in talks with U.S. officials in Washington in early December. Is there a scenario under which you see U.S. hackers being punished for attacks on Chinese companies?

Mr. Cheng: U.S. law enforcement could take an interest in hackers subject to U.S. jurisdiction who attack foreign victims, especially if that victim has a computer that affects interstate or foreign commerce. A Chinese company with customers both in China and in the United States, for example, might present a different situation than a Chinese company with exclusively Chinese customers and no overseas operations. Whether the U.S. would actually prosecute a hacker in that situation depends on a number of factors: the nexus of the activity, any loss or damage in or connected to the United States, the nature of the proof and the extent of the alleged hacking.

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